Energy prices are set to rise 24% in 2026 after the outbreak of war in the Middle East triggered an estimated 10 million barrels per day reduction in global oil supply, which marks the largest oil supply disruption in recorded history, surpassing the Iranian Revolution, the Arab oil embargo and the invasion of Kuwait. Prior to the conflict, the oil market had been heading for a surplus of nearly 4 million barrels per day in 2026, with Brent trading below $60 per barrel in late 2025. The Brent crude oil price, which averaged $69 per barrel in 2025, is forecast to average $86 per barrel in 2026, an upward revision of $26 per barrel since the World Bank's January outlook, before reverting to $70 per barrel in 2027. The Commodity Markets Outlook, published by the World Bank Group, sets out projections for 46 commodities under a baseline assumption that the most acute phase of shipping disruptions through the Strait of Hormuz ends in May 2026 and that export volumes gradually return to near pre-war levels by the final quarter of the year. The Strait, through which roughly 35% of global seaborne crude oil trade and 20% of liquefied natural gas (LNG) trade normally transits, has been subject to near-total closure since the start of the conflict. Energy and fertiliser prices bear the sharpest impact Brent crude climbed from $72 per barrel at end-February to close March at $118 per barrel, the largest monthly dollar increase ever recorded. The Asian LNG benchmark rose 94% over the course of March alone (the sharpest single-month move in a decade) as competition for available cargoes intensified among buyers in Asia and Europe following the near-halt in Middle East LNG exports. Following a two-week ceasefire announced in early April, prices moderated but remained more than 50% above their levels at the start of 2026. Under the baseline projections, European natural gas prices are forecast to rise 25% in 2026 as competition for LNG supply intensifies among European and Asian buyers. Australian thermal coal prices are expected to rise 20% as gas substitution increases demand for coal in power generation across Asia Pacific and Europe. The fertiliser market faces a compounding shock. The World Bank's fertiliser price index is projected to rise 31% in 2026, led by a 60% surge in urea prices (the most widely used nitrogen fertiliser) as the Gulf region, which accounts for approximately one quarter of global urea exports, has curtailed seaborne shipments. Urea averaged $725 per metric tonne in March, the highest level since April 2022. The Islamic Republic of Iran has halted ammonia production due to the conflict, while Qatar has suspended production of urea, ammonia and sulphur following infrastructure damage. Fertiliser affordability is projected to deteriorate to its worst level since 2022, pressuring farming margins ahead of the Northern Hemisphere planting season. Base and precious metals prices projected to reach all-time highs The war has reinforced pre-existing supply tightness across base metals markets. Aluminium prices rose 13% in the first quarter of 2026, reflecting disrupted exports from the Middle East (which accounts for approximately 7% of global aluminium seaborne trade) and higher energy input costs for European smelters. The World Bank projects aluminium, copper and tin prices will all reach all-time highs in 2026, with the metals and minerals price index rising 17% year-on-year. Copper demand continues to be supported by renewable energy infrastructure, electric vehicles and data-centre construction, while supply remains constrained by declining ore grades and mine disruptions. "The war is hitting the global economy in cumulative waves: first through higher energy prices, then higher food prices, and finally, higher inflation, which will push up interest rates and make debt even more expensive," said Indermit Gill, the World Bank Group's chief economist. Precious metals prices are forecast to rise 42% in 2026, reaching a new all-time annual high, with gold projected to average $4,700 per troy ounce. The precious metals index advanced 84% from the first quarter of 2025 to the first quarter of 2026, sustained by safe-haven investment demand amid elevated geopolitical uncertainty. Inflation, rates and the broadening macro shock A finding central to the report's risk assessment is the geopolitical multiplier effect on oil prices: during periods of surging geopolitical risk, a 1% reduction in oil production generates a peak price increase of more than 11%, nearly twice the response associated with non-geopolitical supply shocks. The report attributes this amplification to precautionary stockpiling, risk premia and speculative behaviour that compound the physical supply shortfall, implying that price volatility in the current episode is likely to run structurally higher than historical averages would suggest. The macro consequences are already visible. GDP growth in EMDEs has been revised down by 0.4 percentage points to 3.6% in 2026, with EMDE commodity exporters (many in the directly affected Middle East region) expected to grow by just 2.4%. More than 60% of commodity exporters and 70% of commodity importers globally are now facing weaker growth than projected in January. Consumer price inflation in EMDEs is projected to average 5.1% in 2026, a full percentage point above pre-war forecasts and a reversal of the anticipated deceleration from 4.7% in 2025. Under a more severe scenario (the Strait remaining effectively closed through the second quarter with additional infrastructure damage), Brent crude could average between $95 per barrel and $115 per barrel in 2026. EMDE inflation could reach 5.8%, a level exceeded only during the 2022 surge, with the United Nations World Food Programme estimating up to 45 million additional people at risk of acute food insecurity. The World Bank notes that geopolitical oil supply shocks generate price increases nearly twice as large as ordinary supply disruptions, and that their effects on inflation, growth and debt costs tend to be correspondingly more severe. With the breadth of growth downgrades already spanning the majority of commodity exporters and importers worldwide, the cost of a prolonged closure extends well beyond the oil market.
